What is the 401(k) successor plan rule?
Rev. 12/06/07, E-mail Alert 2007-16

If a 401(k) plan is terminated, a new 401(k) plan may not be established until 12 months after all the assets have been distributed from the terminated plan. A distribution of elective deferrals from a 401(k) plan may not be made if the employer establishes or maintains an alternative defined contribution plan (a/k/a "successor" plan). In the case of mergers or acquisitions, the definition of the term “employer” is applied as of the date of plan termination. A plan is an alternative defined contribution plan only if it is a defined contribution plan that exists at any time during the period between the date of plan termination and 12 months after distribution of all assets from the terminated plan.

Plans that are exceptions to the successor plan rules:
Defined benefit plans (including cash balance plans), ESOPs, SEPs, SIMPLE IRAs, 403(b) and 457(b) plans do not constitute a successor defined contribution plan.

Note: The last three were added by the final 401(k) regulations.

With the exception of the plans listed above, the employer may not maintain any other defined contribution plan during the period between 12 months before the termination date of a 401(k) plan through 12 months after the distribution of all of the assets of the terminated plan.

The 2% Exception to the Successor Plan Rule
However, if at all times during the above period, fewer than 2% of the employees who were eligible under the 401(k) plan as of the date of plan termination are eligible under the other defined contribution plan, that plan is not an alternative defined contribution plan, and the successor plan rules would not be violated.